Tax credits - Let’s not create more problems

Published:11:45Tuesday 10 November 2015

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Many constituents have written to thank me for challenging the Chancellor of the Exchequer over tax credits.

It’s not that I don’t accept the arguments he presented – I have been vocal in my support for radical simplification of the tax system and it’s wrong for employers to use tax credits as an excuse for low pay. But in the process of putting things right, we need to make sure we’re not creating 10 problems when solving one.

I have suggested to the Chancellor that, if tax credits are to be eliminated, then perhaps this loss can be alleviated somewhat by a substantial increase in the Marriage Tax Allowance.

This would provide a disproportionate benefit to taxpayers in the lower half of the income distribution brackets – unlike the personal allowance which tends to benefit those already well off.

It would also provide a robust strengthening of marriage as one of the most fundamental building blocks of our society.

Marriage isn’t just good for our country for moral reasons: it is a firm foundation for objectively measured factors.

Even the poorest 20 per cent of married couples are more stable than all-but the richest 20 per cent of married couples.

The evidence further shows that children growing up in stable married two-parent families achieve more.

The cost of when things go wrong is accumulating: family breakdown is estimated to consume £47 billion per year.

Much of the debate over tax credits has been lost in the fog surrounding the constitutional questions regarding the House of Lords rejecting a financial measure agreed by the House of Commons.

I am a firm supporter of the continued existence of the Lords – as a revising chamber, they often provide helpful advice and it means prospective legislation is scrutinised by men and women of both expertise and experience who might never put themselves up for election as MPs.

We have a very strong tradition in Parliament, however, which means that any actions relating to finance and taxation are matters for the democratically-elected representatives of the people, not for the appointed peers (however worthy they might be). It will be interesting to see how this tradition is adapted in light of recent events.

The introduction of the National Living Wage should help some of those affected by the tax credit proposals.

From next April, its introduction will mean a £900-a-year pay rise for someone working full-time on the minimum wage.

By 2020, it will reach more than £9 an hour, worth at least £4,800 a year extra in cash terms.

Taking tax and benefit changes into account, it means a renting family with two children where both parents work 35 hours a week on the minimum wage will see their income increase in cash terms by more than £5,500.

Overall, we are trying to create a low-tax, high-wage economy to benefit working people here in Lincolnshire and across Great Britain.